After Backlash, Federal Government Reverses Plans to Charge $14K Fee to Distillers Who Produced Hand Sanitizer

When the Covid-19 pandemic first struck in the United States, many alcohol distilleries stepped up and began producing hand sanitizer, a product that was desperately needed in both homes and hospitals to help protect against the coronavirus. Understandably, these businesses — many of which were already financially suffering due to decreased sales — were shocked when the Food and Drug Administration (FDA) sent out notices informing them that they were now classified as manufacturers of regulated over-the-counter drugs and owed a $14,060 fee due February 11.

Fortunately for the distillers, the Department of Health and Human Services (HHS) issued a statement this week directing the FDA not to enforce the fee.

Reason covered the story in a widely-shared article, calling the threatened regulatory fee a crushing blow to these small businesses that had already weathered “one of their worst years ever.” More than 800 American distillers produced hand sanitizer this past year, and many sold it at narrow-to-nonexistent profit margins or even donated large quantities to hospitals, first responders, and essential workers.

Aaron Bergh, president of Calwise Spirits in Paso Robles, California, told Reason that his company produced 5,000 gallons of hand sanitizer, prioritizing medical personnel and other frontline workers.

“Some of my hand sanitizer was donated,” said Bergh. “The rest was sold at a fraction of the market price. My goal was to get as much out as I could, at as low of a price as I could, while being able to bring my furloughed employees back to work. The hand sanitizer business saved me from bankruptcy—but I didn’t make an enormous profit.”

HHS Chief of Staff Brian Harrison announced the fee reversal in a statement posted on Twitter.

“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so,” said Harrison. “I’m pleased to announce we have directed FDA to cease enforcement of these arbitrary, surprise user fees. Happy New Year, distilleries, and cheers to you for helping keep us safe!”

A longer statement from HHS condemned the FDA’s action as a legislative rule that was “not cleared by HHS leadership,” and based on their legal review, null and void because “no one at FDA has been delegated authority to issue such a rule.”

The distillers were obviously relieved by the news.

“The FDA’s announcement at the beginning of this week was set to wipe out our holiday-season profit,”said Bergh, calling it “a New Year’s miracle.” However, Bergh noted that they still worried if the government might try again to impose the fee next year for any sanitizer they made in 2021.

Watch the video clip above, via MSNBC.